Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Dollar General Corp., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,431,523 – 7.76% × 26,309,034 = 389,991
An analysis of the economic value added reveals a period of significant expansion in value creation followed by a sharp contraction in the most recent fiscal year. While the company expanded its capital base consistently, the ability to generate profit above the cost of capital fluctuated substantially.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a strong upward trend from 2019 through 2023, growing from 1.98 billion to a peak of 3.66 billion. A significant acceleration in profitability occurred between 2020 and 2021. However, 2024 saw a substantial decline to 2.43 billion, representing a contraction of approximately 33% from the previous year's peak.
- Invested Capital
- A consistent and linear increase in invested capital is observed throughout the analyzed period. Capital grew from 18.11 billion in 2019 to 26.31 billion in 2024. This steady growth indicates a continuous commitment to expanding the operational asset base.
- Cost of Capital
- The cost of capital remained relatively stable, oscillating within a narrow range between 7.76% and 8.54%. The peak cost occurred in 2022, while the lowest rate was recorded in 2024, suggesting a slight decrease in the weighted average cost of financing toward the end of the period.
- Economic Profit
- Economic profit followed the trajectory of NOPAT but with amplified volatility. After increasing from 502.98 million in 2019 to a peak of 1.64 billion in 2023, it fell precipitously to 389.99 million in 2024. This decline is particularly notable as it represents the lowest economic profit in the six-year series, occurring despite a lower cost of capital and a significantly larger invested capital base.
The divergence between the growing invested capital and the declining economic profit in 2024 suggests a significant reduction in capital efficiency. The company's ability to generate returns exceeding its cost of capital has diminished, as the sharp decrease in NOPAT far outweighed the marginal benefits of a reduced cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Dollar General Corp., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in LIFO reserve. See details »
3 Addition of increase (decrease) in equity equivalents to net income.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 11,090,582 × 4.30% = 476,895
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 803,676 × 21.00% = 168,772
6 Addition of after taxes interest expense to net income.
The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.
- Net Income
-
Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.
- Net Operating Profit After Taxes (NOPAT)
-
NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.
Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.
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Cash Operating Taxes
Dollar General Corp., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.
- Provision for Income Taxes
- The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.
- Cash Operating Taxes
- Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.
- Comparative Insights
- Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.
Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.
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Invested Capital
Dollar General Corp., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of LIFO reserve. See details »
4 Addition of equity equivalents to shareholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
- Total Reported Debt & Leases
- The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.
- Shareholders’ Equity
- Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.
- Invested Capital
- Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.
- Overall Analysis
- The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.
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Cost of Capital
Dollar General Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 33,122,041) | 33,122,041) | ÷ | 51,068,786) | = | 0.65 | 0.65 | × | 10.09% | = | 6.55% | ||
| Long-term obligations, including current portion3 | 6,856,163) | 6,856,163) | ÷ | 51,068,786) | = | 0.13 | 0.13 | × | 4.49% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 11,090,582) | 11,090,582) | ÷ | 51,068,786) | = | 0.22 | 0.22 | × | 4.30% × (1 – 21.00%) | = | 0.74% | ||
| Total: | 51,068,786) | 1.00 | 7.76% | ||||||||||
Based on: 10-K (reporting date: 2024-02-02).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,094,716) | 45,094,716) | ÷ | 62,672,927) | = | 0.72 | 0.72 | × | 10.09% | = | 7.26% | ||
| Long-term obligations, including current portion3 | 6,926,511) | 6,926,511) | ÷ | 62,672,927) | = | 0.11 | 0.11 | × | 4.25% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 10,651,700) | 10,651,700) | ÷ | 62,672,927) | = | 0.17 | 0.17 | × | 3.90% × (1 – 21.00%) | = | 0.52% | ||
| Total: | 62,672,927) | 1.00 | 8.16% | ||||||||||
Based on: 10-K (reporting date: 2023-02-03).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 52,555,043) | 52,555,043) | ÷ | 67,072,297) | = | 0.78 | 0.78 | × | 10.09% | = | 7.91% | ||
| Long-term obligations, including current portion3 | 4,442,986) | 4,442,986) | ÷ | 67,072,297) | = | 0.07 | 0.07 | × | 3.74% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 10,074,268) | 10,074,268) | ÷ | 67,072,297) | = | 0.15 | 0.15 | × | 3.70% × (1 – 21.00%) | = | 0.44% | ||
| Total: | 67,072,297) | 1.00 | 8.54% | ||||||||||
Based on: 10-K (reporting date: 2022-01-28).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 44,929,041) | 44,929,041) | ÷ | 59,094,767) | = | 0.76 | 0.76 | × | 10.09% | = | 7.67% | ||
| Long-term obligations, including current portion3 | 4,706,259) | 4,706,259) | ÷ | 59,094,767) | = | 0.08 | 0.08 | × | 3.74% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 9,459,467) | 9,459,467) | ÷ | 59,094,767) | = | 0.16 | 0.16 | × | 3.90% × (1 – 21.00%) | = | 0.49% | ||
| Total: | 59,094,767) | 1.00 | 8.40% | ||||||||||
Based on: 10-K (reporting date: 2021-01-29).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 36,027,608) | 36,027,608) | ÷ | 47,954,115) | = | 0.75 | 0.75 | × | 10.09% | = | 7.58% | ||
| Long-term obligations, including current portion3 | 3,142,019) | 3,142,019) | ÷ | 47,954,115) | = | 0.07 | 0.07 | × | 3.46% × (1 – 21.00%) | = | 0.18% | ||
| Operating lease liability4 | 8,784,488) | 8,784,488) | ÷ | 47,954,115) | = | 0.18 | 0.18 | × | 4.20% × (1 – 21.00%) | = | 0.61% | ||
| Total: | 47,954,115) | 1.00 | 8.37% | ||||||||||
Based on: 10-K (reporting date: 2020-01-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,485,674) | 30,485,674) | ÷ | 41,575,960) | = | 0.73 | 0.73 | × | 10.09% | = | 7.40% | ||
| Long-term obligations, including current portion3 | 2,864,280) | 2,864,280) | ÷ | 41,575,960) | = | 0.07 | 0.07 | × | 3.62% × (1 – 21.00%) | = | 0.20% | ||
| Operating lease liability4 | 8,226,006) | 8,226,006) | ÷ | 41,575,960) | = | 0.20 | 0.20 | × | 3.62% × (1 – 21.00%) | = | 0.57% | ||
| Total: | 41,575,960) | 1.00 | 8.16% | ||||||||||
Based on: 10-K (reporting date: 2019-02-01).
1 US$ in thousands
2 Equity. See details »
3 Long-term obligations, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dollar General Corp., economic spread ratio calculation, comparison to benchmarks
| Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | Feb 1, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 389,991) | 1,644,520) | 1,276,173) | 1,349,790) | 545,152) | 502,984) | |
| Invested capital2 | 26,309,034) | 24,763,719) | 21,499,995) | 20,896,699) | 19,125,860) | 18,107,408) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 1.48% | 6.64% | 5.94% | 6.46% | 2.85% | 2.78% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Costco Wholesale Corp. | 6.44% | 1.64% | 5.72% | 4.12% | 0.36% | — | |
| Target Corp. | -2.14% | -3.91% | 8.76% | -0.71% | — | — | |
| Walmart Inc. | 1.01% | -1.40% | -0.86% | 0.61% | — | — | |
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 389,991 ÷ 26,309,034 = 1.48%
4 Click competitor name to see calculations.
Analysis of the economic value added indicates a period of significant expansion in value creation between 2019 and 2023, followed by a sharp contraction in the most recent fiscal year. While the capital base grew consistently throughout the period, the efficiency of that capital in generating returns above the cost of capital experienced high volatility.
- Invested Capital Trends
- A consistent upward trajectory in invested capital is observed, increasing from 18.1 billion USD in 2019 to 26.3 billion USD by 2024. This indicates a sustained commitment to expanding the asset base over the six-year period.
- Economic Profit Performance
- Economic profit demonstrated substantial growth from 2019 through 2023, reaching a peak of 1.64 billion USD. A notable surge occurred between 2020 and 2021, where profit more than doubled. However, this trend reversed sharply in 2024, with economic profit falling to 389.99 million USD, marking the lowest point in the analyzed timeframe.
- Economic Spread Ratio Analysis
- The economic spread ratio remained relatively stable at approximately 2.8% between 2019 and 2020 before increasing significantly to 6.46% in 2021. The ratio maintained a strong position above 5.9% through 2023, peaking at 6.64%. A severe contraction is observed in 2024, with the ratio dropping to 1.48%, signaling a substantial decline in the ability to generate returns in excess of the cost of capital.
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Economic Profit Margin
Dollar General Corp., economic profit margin calculation, comparison to benchmarks
| Feb 2, 2024 | Feb 3, 2023 | Jan 28, 2022 | Jan 29, 2021 | Jan 31, 2020 | Feb 1, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 389,991) | 1,644,520) | 1,276,173) | 1,349,790) | 545,152) | 502,984) | |
| Net sales | 38,691,609) | 37,844,863) | 34,220,449) | 33,746,839) | 27,753,973) | 25,625,043) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 1.01% | 4.35% | 3.73% | 4.00% | 1.96% | 1.96% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Costco Wholesale Corp. | 0.85% | 0.24% | 0.81% | 0.61% | 0.06% | — | |
| Target Corp. | -0.68% | -1.08% | 2.49% | -0.23% | — | — | |
| Walmart Inc. | 0.24% | -0.35% | -0.24% | 0.18% | — | — | |
Based on: 10-K (reporting date: 2024-02-02), 10-K (reporting date: 2023-02-03), 10-K (reporting date: 2022-01-28), 10-K (reporting date: 2021-01-29), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-02-01).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 389,991 ÷ 38,691,609 = 1.01%
3 Click competitor name to see calculations.
The financial performance from February 1, 2019, to February 2, 2024, is characterized by a steady increase in top-line revenue contrasted with significant volatility in economic value creation. While net sales maintained a consistent upward trajectory, economic profit and the corresponding profit margin experienced a period of expansion followed by a sharp contraction in the final year.
- Net Sales Performance
- A consistent growth pattern is evident in net sales, which rose from approximately 25.6 billion USD in 2019 to 38.7 billion USD by 2024. This represents a sustained expansion of the revenue base over the six-year period, with a particularly notable acceleration occurring between 2020 and 2021.
- Economic Profit Trends
- Economic profit exhibited substantial fluctuations. After remaining relatively stable between 2019 and 2020, there was a significant surge in 2021, where profit more than doubled to 1.35 billion USD. This growth trend peaked in 2023 at 1.64 billion USD. However, a severe decline occurred in 2024, with economic profit falling to 390 million USD, the lowest level recorded in the analyzed period.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute profit figures. The margin remained stagnant at 1.96% through 2020 before climbing to a peak of 4.35% in 2023. This period of expansion indicates a phase where the company generated returns significantly above its cost of capital. This trend reversed abruptly in 2024, with the margin contracting to 1.01%.
The divergence observed in the final year of the analysis is critical; despite net sales reaching their highest point in 2024, economic profit and the economic profit margin collapsed to their lowest points. This suggests that the growth in revenue was decoupled from value creation, likely due to an increase in the cost of capital or a significant decrease in operating efficiency relative to the capital employed.
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